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How the Unemployment System Works -- Part 2

By Joel Handelsman | June 29, 2012

Some people otherwise eligible for benefits can still be disqualified from receiving benefits, based on how and why they lost their jobs. Generally, unemployment benefits are designed for people who are laid off because the employer doesn't have enough work for them, or who lose their jobs because of something the employer did wrong. So, workers will be disqualified if:

  • The worker left the job voluntarily, without a good cause connected to the job. In all states, a worker who quits because the employer does something nasty like harassing or discriminating against him or her, or making a significant change in wages, hours, job duties, location, or other working conditions, has "good cause" to quit and won't be denied benefits. States differ in their interpretation of whether "good cause" includes quitting for health-related or personal reasons, such as a spouse's relocation. Consult your attorney for the most up-to-date rules that apply to your area.
  • The worker turned down a suitable job offer during the period of unemployment.
  • The worker was fired for misconduct. In situations involving misconduct, documenting warnings and disciplinary measures taken will enable you to easily prove what happened and keep the worker from receiving benefits at your expense. Poor performance or incompetence isn't usually considered misconduct. Although you have the right to fire a poor performer, he or she will probably be able to collect unemployment compensation.
  • The worker is unemployed because of a strike or other work stoppage caused by a labor dispute.
  • The worker is receiving workers' compensation payments, Social Security payments, a private pension, or severance pay.
  • The worker lied on the benefit claim or omitted some important information, in order to get or increase benefits.

Should you contest one of your employee's unemployment claims? If they don't deserve the benefits, you should, but there's no point in wasting your time and running up legal bills by contesting the payment of benefits to workers who deserve them.

If you have to lay someone off because business isn't booming as you had hoped, or if you fired someone because you want to hire your brother-in-law instead, don't bother to object when your ex-employee makes a claim. On the other hand, if you have to fire someone for stealing or someone quits to start their own business, you can and should contest a claim for unemployment benefits.

What do you do if you're not sure whether the worker deserves benefits or not? Go ahead and contest the claim, up to the point where you'd need to hire a lawyer. At that point, if the worker has won, you may want to reevaluate whether the issue is worth pursuing. Your lawyer should be able to estimate your chances of winning.

There may be times when it's not in your interest to prevent your worker from collecting benefits, even if you would probably win if you tried. The most common situation is where you want to get rid of someone but don't have a good (or a legal) reason for doing it, or you suspect the worker is going to sue you.

What do you do? You "buy out" the worker by offering a severance package. The package may include an agreement that you won't do anything to prevent the worker from collecting unemployment, along with some severance pay, continuation of health benefits, or other items. If you go this route, have the worker sign an adequate release of liability before he or she leaves.

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